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tv   PBS News Hour  PBS  October 26, 2011 6:00pm-7:00pm EDT

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captioning sponsored by macneil/lehrer productions >> brown: in denver today, president obama outlined a relief plan to ease the pain of growing student-loan debts. good evening, i'm jeffrey brown. >> ifill: and i'm gwen ifill. on the "newshour" tonight, as student loan burdens continue to soar, what can washington do to reduce the cost of getting a college degree. >> brown: then, margaret warner looks at today's emergency economic summit in brussels. >> ifill: united auto workers president bob king, on the state of the industry and its unions,
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as workers approve the last of three big contract agreements. >> brown: spencer michels updates the occupy wall street movement, as police confront protesters in oakland and atlanta. >> the melee between police and demonstrators has evaporated for now but the smell of tear gas lingers on the demonstrators say they'll be back. >> ifill: paul solman talks to a law professor who argues inequality may not be such a bad thing after all. >> if, in fact, it turns out that inequality creates an incentive for people to produce and to create wealth, it's a wonderful force for innovation. >> brown: plus, kwame holman looks in on the congressional super committee, holding a rare public hearing on its debt negotiations with a november deadline looming. >> brown: that's all ahead on tonight's "newshour." major funding for the pbs newshour has been provided by: >> computing surrounds us. sometimes it's obvious and sometimes it's very surprising where you find it.
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soon, computing intelligence in unexpected places will change our lives in truly profound ways. technology can provide customized experiences, tailored to individual consumer preferences, igniting a world of possibilities from the inside out. sponsoring tomorrow, starts today. >> you can't manufacture pride, >> and by the bill and melinda gates foundation. dedicated to the idea that all people deserve the chance to live a healthy productive life. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting.
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and by contributions to your pbs station from viewers like you. thank you. >> ifill: president obama turned today to the cost of college and the struggle to pay for it. he laid out a plan to speed up help for millions of american students. and he said it comes at a time when a college degree has never been more expensive or more important. the white house chose to talk about student loan relief today, to an audience feeling the pain- - thousands of students at the university of colorado-denver. >> when a big chunk of every paycheck goes toward student loans instead of being spent on other things that's not just bad for middle class families that's painful for the economy and it's harmful to our recovery because >> ifill: mandatory payments on student loans are already set to be scaled back in 2014, but the president's plan would accelerate that timeline to
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2012. that executive order will cap maximum student loan repayments at 10% of discretionary income, down from the current 15%. 1.6 million borrowers would qualify. any remaining debt will be forgiven after 20 years instead of 25. the president also ordered that nearly six million people be allowed to consolidate federal student loans and reduce interest rates up to half a percent. he said the changes are critical for students facing pressures from a global economy. >> we live in a time where over the next decade 60% of new jobs will require more than a high school diploma. and other countries are hustling to out-educate us today so they can out compete us tomorrow. they want the jobs of the future. >> ifill: it was the latest in a series of executive actions the president is taking to bypass the congressional roadblock that has stymied his larger jobs bill. soaring college costs have
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become a key concern. the college board reported today that average in-state tuition and fees at four-year public colleges are up 8% this year. that makes the cost of a full course load, upward of $8,000, more expensive than ever. 36 million americans owe on student loans, a burden which now surpasses credit card debt. >> ifill: for more on the latest effort to address the problem of college debt, we turn to jeff selingo, vice president and editorial director of the chronicle of higher education. and anya kamenetz, who has written widely on the subject including the book, "generation debt." jeff selingo, we heard 36 million people are paying college debt. this plan that the president put forward today would affect 1.6 million. how much of it a difference would it make? >> it's not going to make a huge difference. between both programs, it's probably going to impact about seven million of those people in repayment or new students coming into the program.
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the thing about the income-based program that was announced today is that it's only going to affect students in college right now. so all of these students, these recent college grads who have graduated with a lot of debt who are now looking for jobs and can't find them or are doing jobs that only require a high school diploma, it's not going to provide much help to them. the. >> ifill: anya kamanetz, is it worth doing? >> it's certainly worth doing if you're eligible for it. as jeff mentioned, this program is very undersubscribed. it's been around for two years. 1.6 million people may be eligible but only 450,000 are actually enroll sod i think the most important thing about the president's announce system that more people are going to be aware that they have this option. >> ifill: let me ask you about that. if that few people who are current eligible for the program as it stands are taking advantage of it, why? why not? i who not more? >> i think it's been underpublicized. i think there's a lot of red tape involved. people don't understand the process and the advantages of it.
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and it's also important to point out that this does not apply to many types of student loans. so it's not going to apply to your parental plus loans, for example. it also doesn't apply to private student loan which is have been growing at a very fast pace, about three times faster than these federally subdiesed student loans. >> and it only applies to low-income borrowers at the end. low-income graduates. so there are income caps on it. it has been proposed that income contingent loans should be extended to everybody so you should always be able to pay back a portion of your student loans based on your income and that's one of the ideas that have been floated in recent weeks, especially as student loans have become a big issue in the occupy wall street movement. >> ifill: it's also been floated at that movement in particular that these loans should be forgiven outright. >> it has. that's probably impossible... an impossible dream. i think that students and parents do have a role in paying for college. you know, states pay a little bit; the federal government pays a little bit; institutions pay.
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but i think student debt has been made a villain in the occupy wall street movement and at the end of the day, students and parents do have to pay a part of college tuition and many times they have to take out student loans to do that. >> ifill: anya kamanetz, is this because students are borrowing more or is it because the prices are unsustainable in order to get this education? >> well, i think both of those things are true. you know, this announcement with the president doesn't do anything to impact the other announcement we heard today that public college tuition grew at 8% last year. that was led by a giant increase at the university of california system. and if the underlying costs of college are not addressed it doesn't matter how you finance it or pay for it, the burden will continue to grow. i believe students and families have have had enough. that's why the occupy wall street movement is saying. it's saying that the cost of college is getting to a point where people are questioning that value even if economists tell you that it's a good idea to get a college education, it
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just doesn't seem to add up for a lot of graduates. >> ifill: it should be said, the president, jeff selingo, never mentioned occupy wall street in his comments today and this was not in the white house's mind, at least they didn't overtly say it was linked to that movement. but i wonder whether there is a debate that could be had about what the federal government's role is in bringing down costs rather than in forgiving debt and whether that's where the attention should be paid. >> i think there is a role for the federal government to figure out why colleges cost so much and why certain colleges cost a lot more than others. we reported today that now about 133 colleges are over $50,000 in terms of tuition room, board, and fees. >> ifill: these are private and public. >> these are private colleges, i think there's one public college on the list. and i think anya brings up a good point. anya says going to college pays off up a long run. that gives you about $500,000 more in your paycheck over your lifetime compared to a high school diploma.
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so going to college makes sense but does going to an expensive college make sense in. >> ifill: what do you say, anya? >> i think cost benefits have to take in the full landscape of colleges and what expense is is really changing. public tuition has... increases have outpaced private tuition increases for the past two years and state budgets are really slashing higher education and shifting the cost on to students and so even if public schools look comparison, you know, there are few bargains left in the world of higher ed. >> ifill: this plan was to consolidate federal loan bus doesn't have any effect on the public loans we're talking about does it? >> private lending is still a big portion of what students get. another piece that was not announced today but the federal government, the education department is looking at is to require colleges to be clearer about the financial aid letters they send to students and parents. many of those are confusing.
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you're not sure how much money you're borrowing or getting in grant aid. there's now a movement through the new consumer bureau in the federal government to require colleges to be very clear with parents and students about what they're getting in terms of loans, what they're getting in terms of grant which is don't have to be paid back which will allow parents of students to make comparisons between colleges because it's not clear right now how much they're borrowing in some cases. >> ifill: are you saying... i want anya to respond to this as well. if people had a better understanding of what they're getting into they might make difference choices? >> there's very little information sometimes by students and parents about the cost of college. going to college is the american dream. for some students and parents going to a certain college is a dream. but i think if students and parents had better information up front about what they're getting into and the overall cost of this college over the four years plus after you get out of college and really taking sense of what your job prospects are i think students and parents
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might make different choices. >> ifill: what do you think about that, anya? >> an improvement in the financial aid letter is a start and i think's room for improvement. but you don't get that financial aid letter until you apply and are accepted. so we need to intercept families and parents and students earlier in the process when they're thinking about what college to go to and lots of different ways to cut down their cost of attendance by perhaps starting at a community college, shortening their overall time to a degree, that's gotten longer and longer, that's a huge factor in what students are paying so it goes beyond the issue of financial aid and there's an overall comprehensive gap in information and education that students and families need. >> reporter: when does that happen? >> i would say when people are in high school and starting to think about the college application process, whether to take the s.a.t.s there's a very big shortage of guidance counselor time in public high
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schools so a lot of people don't have the information they need and they feel college is out of reach because they don't know all the different ways they can pay for it. >> ifill: is there any concern-- and i don't know whether it would be your concern-- that banks and the private loan institutions involve misdemeanor making this money are going to lose out because it's being consolidated in these lower interest programs? >> they are lost out. the government moved to a direct lending program last year under a law president obama signed so many of the banks that v lost out on this program. >> ifill: but is that the right... go ahead. >> it's important to know as well that private student loans that are unsubdiesed by the federal government are going three times faster than the federal student loans and they're on track to surpass volume of federal student loans. so banks are making good on their own brand of student loans which are non-dischargeable in bankruptcies and are products that far r far more expensive than federally subsidized loans and that's a huge problem as well. >> ifill: anya kamanetz and jeff
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selingo, thank you very much. >> good to be here, thanks. >> brown: still to come on the "newshour": the eurozone's challenge; labor's view of the car industry; spreading occupy wall street confrontations; wealth inequality and the deficit reduction talks. but first, the other news of the day. here's hari sreenivasan. >> sreenivasan: former goldman sach's board member rajat gupta pleaded not guilty today to federal charges of insider trading. he surrendered this morning in new york city, and was released later on $10 million bail. gupta is accused in the largest insider trading case in history. he allegedly aided raj rajaratnam-- a former billionaire hedge fund manager, who's been sentenced to 11 years in prison. wall street racked up late gains on reports that china might invest in a financial bailout fund for european countries. the dow jones industrial average gained 162 points to close at 11,869. the nasdaq rose 12 points to close above 2,650. the casualty count from sunday's devastating earthquake in turkey rose again today to 461 killed
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and more than 1,300 injured. at the same time, three more people were rescued, including this teacher. she was carried away after being pulled from a collapsed building. workers continued the search with shovels, but the chances of finding more survivors were dwindling. in ankara, turkish prime minister recip erdogan blamed shoddy construction led to the large number of dead and injured. >> ( translated ): we see that people are paying the price for concrete that virtually turned to sand, or for weakened concrete blocks on the ground floors. municipalities, constructors and supervisors should now see that their negligence amounts to murder. >> sreenivasan: the prime minister also acknowledged problems in sending aid to thousands of people who lost their homes in the quake. the turkish red crescent reported 17 aid trucks were looted before the supplies could be distributed. thousands of people jammed roads leading away from bangkok, thailand today, as rising floodwaters swamped more of the city. elsewhere, vast swaths of countryside remained under water. we have a report from john sparks of "independent
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television news," who traveled to a town north of bangkok. >> reporter: our journey began in the back of a thai air force chopper filled up with donations with rice and water. we were heading to a place we'd never heard of called ban kudi. the people need help there, said the pilots. they're trapped by the inland sea. we flew over the deluge where the floodwaters spread to the horizon. and it was here that the pilots began their descent. down below, somewhere, was ban kudi. we saw small boats gathering in anticipation and our helicopter's contents were flung over the side. there's really no other way to get here. the alternative, say the pilots, is a seven hour boat trip and we're only 80 kilometer from the capital. these people are completely cut off. the worst flooding in decades has forced two million people
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out of their homes. hundreds of thousands now camp on the country's highways. yet, we'd come to find the residents of ban kudi and we drove until the road gave out. they collected us by boat-- a delegation from the town anxious to show us how they've been living. how long has ban kudi been cut off by the waters? >> ( translated ): almost two months now. two months. >> reporter: 2,000 people lived in the area and incredibly, the majority have stayed put, we were told. we found two women in canoes and i asked them how they passed the day? >> ( translated ): we don't do much. sometimes we catch fish to get something to eat. we have some rice donated to us to keep us going. what else can we do? >> reporter: marooned on a sea of stagnant water. this the cause of great hardship. but it won't drain quickly from a waterlogged nation.
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there are months left to endure on the inland sea. >> sreenivasan: the monsoon floods in thailand have killed more than 370 people since july. in syria, thousands of president bashar al-assad's supporters rallied in damascus today. they turned out hours before a delegation from the arab league arrived. the league has called for talks with the opposition, instead of military assaults. meanwhile, activists said at least nine syrians were killed by security forces today. and nine soldiers died when a grenade hit their bus. those are some of the day's major stories. now, back to jeff. >> brown: and we turn to the debt and bank crises in europe, as leaders-- the 17 who use the euro and some who don't-- gather to try to resolve their differences. we begin with a report from laura koonsberg of "independent television news" in brussels. >> reporter: what is in and what has germany ruled snout close attention to the detail is still being done in brussels tonight and people may find it falling short. for all, fine tuning is going on but leaving the euro zone leaders to it the p.m. said it's
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on its way. >> we made good progress tonight. it's very much there britain's interest that we solve these prices. we made good progress on the bank recapitalization. that wasn't what was agreed, it would only go ahead when the parts of the package go ahead. >> reporter: but the draft deal on the table seen by it vie news is not all. that funding for banks-- nearly $100 billion pounds-- had already been agreed on sunday. >> there's no final agreement on the size of the rescue fund to insure other countries against meltdown. it will include public and private money and from the i.m.f. but won't be finalized until the end of november. and the draft has no mention of how much greek debt private investors will agree to write off. it's not even been easy to get this far. the greek leader made this plea on behalf of his country that's drowning in debt. >> our challenge today is not simply to save the euro, it's to safeguard the ideals with cherish so much in europe.
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>> reporter: and while italy's silvio berlusconi was under pressure in brussels, in his parliament he's ended up in a fight about changing the retirement age, an astonishing sign of how controversial it will be for them to cut spending. while in a somber debate in germany, angela merkel warned her colleagues it was now or never to save the euro. but the draft of the final agreement i've seen is likely to disappoint. there is no complete deal on the rescue fund and may not be one until the end of next month. there's hardly a mention of the amount of greek debt that's to be written off, not the grand bargain that was promised. all the leaders here stew and say they want to save the euro but in truth they also want very different things. angela merkel that has biggest checkbook and wants to protect the currency but also wants to prevent germany's taxpayers from having to keep promising their cash.
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nicolas sarkozy can't afford to shell out as much as germany and wants europe's central bank's money to be used in the bailout fund. while silvio berlusconi has been told by france and germany to get his house in order and deliver on his promises to sort out the italian economy-- a much bigger concern than greece going down because it's just so much larger. talks are still going on with the final shape of the deals not expected until midnight. but however long the discussions continue, the end of the crisis is not in site. >> ifill: margaret warner takes the story from there. >> warner: so what did the leaders accomplish, and what remains to be done. we get that from zanny minton beddoes, economics editor of the "economist" magazine. zanny, welcome back. as we heard, there weren't a lot of specifics coming out of brusselss at least not so far, though they're still meeting. what if anything did lise these
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leaders resolve? >> the answer is we don't know yet because as your report said they are still talking and we haven't had any final details but i think the tone of your report was right. they promised there would be a comprehensive solution to this crisis and what seems to be on the table is rather short of that. they needed to make progress on two fronts, first of all, creating a firewall around countries like italy and spain that are embattled but not insolvent and that meant boosting the firepower of the european rescue fund. secondly they needed to make progress and recapitalize the euro's banks. thirdly they needed to come to a realistic debt deal for greece because that which was agreed earlier this summer everybody agrees is not enough and fourthly they need to make progress on improving europe's governance, europe's rules so they don't get into this mess again. the question is how much progress will they end up making on all of those? and it seems from what's dribbling out... and let me repeat, we don't know yet what the final thing will be. but it does seem as though
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progress will be somewhat unimpressive. >> reporter: explain to us... we'll take the pillars or as many as we have time for and take the first one that you mention which had is recapitalizing the european banks and getting them to have more of a capital cushion for the sovereign debt they hold now. why is that so important? >> well, that's extremely important because european banks are at the moment unable to attract funding and people are very worried about their financial health because these banks hold a huge amount of sovereign debt. and the sovereign debt people are worried about the ability of the governments in europe to repay that sovereign debt and that's caused a lot of concerns about the european banks so this is why these problems are interlinked. and if you recapitalize the banks you put them a stronger position but until you create a firewall around the sovereign which is makes clear that then actually no amount of bank
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recapitalization is enough. so i would put these four things that they have to do in a slightly different order and i would say the single most important thing is to bolster europe's rescue funds so that they can create this firewall around countries like italy and spain. >> warner: so that fund now is roughly, what, $610 billion? the german parliament, at least voted to approve increasing that. one, is that significant? and if so, by what size and how do you get from there to getting all the european leaders to agree? >> this gets very technical. what the europeans have now is the european financial stability facility which has, yesterday, $440 billion euros and it that has ability to issue bonds which are then guaranteed by europe's government. and everyone knows that's not enough money to credibly stand behind a country likeitaly so
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the question then is how do you increase that firepower? and over the last few weeks and month there is's been arguing about how to do it. one way would be for the european governments to put more money in. another way would be to have the european central bank either lend to that fund or put money in directly. again, they ruled that out. the e.c.b. is not going to do any more. so what they seem to have resorted to is financial engineering which will do two things, the funds will be allowed to basically insure against the first 20% loss of any new bonds that are issued by say, italy or spain and a second part of the plan will be... you will laugh at this, it will take a special purpose vehicle, a special purpose investment vehicle which if you speak english-english i suppose is a kind of slightly dodgey character. so they're going to create ispiv special purpose investment vehicle-- is going to be a new
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fund in which they hope other investors will put money. and so they're going to hope that the chinese, for example, might come in and cough up some money. but the idea is that no more from the european governments, none from the european central bank but insaid there's leverage. >> ifill: finally the third big one you named was, of course, the greek debt and trying to change the terms of that and get the private investors to take more of a loss, a hair cut. i think we know why that's important but what's the hangup? why can't these european leaders basically order the banks to do it? >> well, because they're desperate to have this be a voluntary deal. if it's voluntary, quote/unquote then it doesn't trigger credit default swaps, which are sort of the insurance mechanism that banks take out to guard against the possibility that a country defaults. they don't want to trigger those so they won't have a voluntary restructuring and that's what they agreed in the summer, but that voluntary restructuring they agreed was very small and a
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very small reduction in the present value of greek debt. now the new numbers have shown that greece needs a much, much bigger debt reduction and the question is how far can they push the bankers to agree, a value tear one or will they say take it or leave it, you have to do a bigger one. that's where a lot of argument is still going on amongst european politicians because some are terrifying of doing a fourth one, others say the number has to be very, very big. >> warner: well, i guess a lot more argument to come. zanny minton beddoes, thanks so much. >> my pleasure. >> brown: now, a new contract for autoworkers, but a continuing struggle for the future. today, chrysler's workers became the last of the big three companies to ratify a new four- year labor contract. these are the first new contracts since chrysler and g.m. nearly went under two years ago and they reflect a very changed industry. among the common elements: giving up annual pay raises in favor of bonuses and profit- sharing for workers; some new
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jobs added and the opening of several plants by the automakers and new caps on the percentage of entry-level workers. in the industry's growing two- tiered salary system, such workers are paid lower hourly wages, similar to foreign automakers. officials of the united auto workers fought hard to get members to ratify the contracts after several major plants voted against the deals. the head of the u.a.w., bob king, joins us now from detroit. welcome to you. >> thank you, good to be here. >> brown: so when you came to the threshold issue in these negotiations, the thing you had to have to reach an agreement, is holding on to jobs more important now than negotiating higher wages? >> absolutely. no worker is secure unless you've got new products and new investments coming into their facilities. that was our highest priority and the priority we made the most gains and the most success. >> reporter: and after losing so many americans in the last decades and after what happened
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a couple years ago. do you go into negotiations like this inevitably from a position of weakness? how do you feel going in? >> no, i think that we... you know, i think we still have considerable leverage and power in the industry. i think our view has changed. we understand the people who have the most at stake in the long-term success of these companies is our membership. c.e.o.s change, shareholders change, management changes. but our members are there and their long-term security, pensions, health care, economic security is tied into long-term success of the company so we're focused on making sure there's new product, new investment, good technology highest possibility technology for the consumers. so our role has shifted as we've gotten into more of a global economy and global competition. >> reporter: with this two-tiered wage system with most coming in at lower wages, is
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that now the new normal for union workers and is that dividing your members? two classes of workers, essentially. >> well, i'm proud of our membership. the traditional members put the highest priority on raising the wages and benefits of the newer members. that's the greatest spirit of solidarity. traditional members got no base rate increase. the new members got $3.50 an hour. it's long been a value of the u.a.w. that people doing the same job should make the same rate of pay. we had to deviate from that. and this is the first contract where companies are beginning to be healthy again. none of them are totally out of the woods but they were in good enough economic shape to do $3.50 base rate increases for entry level. so we're happy with that. we'd like to see them more but we thought that was viable for the company, kept us exceptive
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and the lump sums and profit sharing there are not two tears. everybody's treated the same and so in actual annual income we made tremendous improvements for entry level. >> brown: but i said you had to work hard to get members to ratify in fact you faced a fair amount of dissent along the way. you had lower ratification rates than historically. you had some important plants even reject the contract. so what do you say to workers who say to you, look, we gave up a whole lot a few years ago, we don't seem to have gotten much back and they're also seeing that the c.e.o.s at the companies are still making a lot of money and complaining about it. >> well, c.e.o. pay has been an issue for the last 50 years. our country's out of whack with most places in the world. we have to give shareholders and employees of shareholders more of a voice in c.e.o. pay. that's a legislative issue as well as a contractual issue.
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in no contract do you get everything you want. did we make substantial progress in this contract? we think we did, especially product investment. we were not concerned about ourselves and membership, we were concerned about our communities and getting jobs in america. we were very appreciative of the american taxpayer, president obama, for believing in the american auto industry, believing in american workers so we wanted to make sure the number one priority was too create jobs in america. so there will be a lot of people and a lot of communities around america that are hired into middle-class jobs because of what we did in this contract. >> brown: i guess i'm asking you about the rift, the frustration within union ranks. >> well, i'm sorry, but you seem you want to make a rift where i don't think there's a rift. >> brown: okay. >> traditional workers voted overwhelmingly to support entry level workers getting $3.50 a raise an hour even though they were not. we've seen this over and over
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again in the u.a.w. in the agricultural implement industry we were forced into a two-tier situation a number of years ago. we've done three contracts since then. every contract, the traditional workers have demanded more be done to equalize the newer workers. and that's our goal in the auto industry, too. >> brown: so what is the situation for the auto industry more broadly after we watched what happened a couple years ago. >> we're in much better shape than we were. we're all tied together globally economically. so we know we're not out of the woods yet. if europe detier your rites economically that will have impact in the u.s. right now we're in meets with general motors today, global unions and general motors and one of the point it is company was making that i concur with is that we think that the 13 million... because a lot of people are buying replacement
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vehicles. of course we'd love to see it back up to 16, 17, but if we stay in the 13, 14 area we'll have healthy companies. our members will share profit sharing. we'll be building capacity and strength for the future. >> reporter: and more broadly where, of course, in this era where we're see manager states push back against their public sector unions and more states talking about or implementing right to work laws, how do you make a case now for for traditional union in our era. >> the best example is the auto industry. here's business, management, and labor. rather than pole orrizing and taking positions we dime the table collectively. we said here are the issues, how do we do creative problem solving to help the companies and our membership and we showed both during a period of bankruptcy and now with this agreement that we can work together for the good of the companies, to the good of our anybodyship and the good of our
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communities and our country. >> brown: and you think you can make a case to the american public unions are still important? >> i think absolutely. we're proving it. if it wasn't for the u.a.w., a lot of these investments would have been all over the world and not in the united states of america. we stood up for our members. we stood up for america and to the company's credit, they worked with us in creating jobs and investments here in the united states of america. and so i believe in american consumers-- which are already showing more preference again for u.s.-made vehicles because we're making highest-quality vehicles-- you're going to see the market share grow for general motors and for chrysler and for ford. >> brown: bob king is president of the united auto workers. thanks very much. >> thank you very much. >> ifill: next, two stories on the growing debate over inequality, wall street and the role of corporations. first, police and protesters have begun clashing in some of
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the cities where demonstrators are taking part in the occupy movement. "newshour" correspondent spencer michels reports from the center of one such confrontation. >> reporter: chaos reigned in downtown oakland, california overnight. clouds of tear gas obscured protesters as they ran from police, their screams ringing through the night. >> taking away people's right to peacefully assemble. in this country, this is really outrageous. >> reporter: the confrontation erupted as police moved to disperse crowds from the occupy oakland movement, part of a wave of protests nationwide against social and economic inequality. similar clashes broke out
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earlier, when protesters tried to re-occupy the camp they'd been evicted from, outside oakland city hall, before dawn. >> protesters were not being violent. they provoked protesters. >> they shot tear gas into the crowd. flash bangs. women, children, grandmothers, grandfathers. they were all standing in the same spot. >> reporter: police insisted they fired tear gas only after they were attacked by the crowd. >> they had already thrown bottles at us. they were going back into a garbage can to retrieve more bottles and by policy we are allowed to use less lethal rounds to neutralize that person and take him into custody. >> reporter: police also denied using flash-bang grenades, as demonstrators had charged. they said the explosions came from firecrackers, thrown by protesters. in all, upwards of 85 people were arrested.
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the plaza in front of oakland city hall was mostly quiet today, eerily quiet after the demonstrators camp was dismantled. there were reports this morning you could still smell the tear gas, and tonight there might be more as demonstrators have vowed to come back. the city's plan to break down the camp had been in the works for at least a week, with officials citing a hazard to public health. the decision to move in ultimately fell to city administrator, deanna santana. oakland mayor jean quan was in washington on business and returned today. >> i made the decision with the team that was in place to put an end to what i see is a very critical situation that posed significant risk. >> reporter: but it appeared last night's violence might be only a taste of what's to come. members of occupy oakland warned today they won't be moved. mike porter, a direct tv
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salesman, took a week off work to join the protest. he spent eight days in the encampment. >> if you're coming down here because you don't like the police you're not here for the right reasons. you might as well just stay at home unless coming to get educated. >> reporter: the occupy movement grew out of a series of demonstrations in new york city known as occupy wall street. protests have since spread to a host of other cities-- portland, maine, chicago, illinois and denver, colorado among them. in atlanta, authorities say the threat of a weapon was one factor that spurred riot police to move in last night. during the afternoon, a man had walked around a protesters' camp site, openly carrying an a.k.-47 assault rifle. atlanta mayor kasim reed said that forced the city's hand. >> we could not determine whether the weapon was loaded and could not get additional information on the weapon. >> reporter: but the protesters insisted they didn't know the man with the gun. >> we have nothing to do with this.
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we did our job and informed the police and the police are watching him. >> reporter: the order to clear the park came late in the night. more than 100 people were arrested, and some had to be carried off. in the meantime, the protesters found some support in a new cbs news/"new york times" poll. it found that 43% of americans agree with the views of the occupy wall street movement. 27% were opposed. back in oakland today, one woman viewing the scene of last night's trouble said she had problems with both sides. >> i don't think the police should be out here like this either. intimidating children and single parents like myself. my daughter was scared the other day when they were all coming down the street marching. she was like, what's going on? i was like, we'll be okay. it was just a little too exaggerated to me. >> reporter: on both sides? right, yes. for now, law enforcement officials and neighborhood groups in a number of cities are grappling with how to handle the
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camps, and the issues raised by their ongoing presence. >> brown: now, to our own continuing series on inequality. a new analysis from the congressional budget office supports the idea that income inequality has grown considerably over the past few decades. the report found that household income grew by 275% between 1979 and 2007 for the wealthiest 1% of the population. for the rest of the top fifth of the country, it grew by 65%. by contrast, the bottom fifth of the population saw its income grow by just 18%. the "newshour's" economics correspondent paul solman has been exploring the consequences of those trends in previous stories he has done in his series. tonight, he gets a contrarian view, suggesting inequality in a free market system may not be as bad as advertised. it's part of his ongoing reporting on "making sense of financial" news.
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>> reporter: richard epstein, welcome. >> thank you for having me. >> reporter: what's good about inequality? >> what's good about inequality is if, in fact, it turns out that inequality creates an incentive for people to produce and to create wealth, it's a wonderful force for innovation. so let's just go and take somebody like bill gates or any entrepreneur. the guy earns $50 billion, right? how much consumer welfare has he created by selling products? we can estimate the amount of gains to purchasers because everybody who buys one of his products or one of steve jobs' products in effect, values it more than he receives. the social gain from inequality to consumers of those goods probably dwarfs the entrepreneurial gain by a factor of ten or 20:1. >> reporter: so you mean the incentive for great wealth had steve jobs and bill gates create products which created so much value that it far outstripped the compensation to them? >> yes. and one of the fundamental mistakes about the egalitarians is they're so interested in
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trying to minimize differences that they don't understand the completely adverse effects that it has on the size of the pie. >> reporter: epstein worries about attempts to raise marginal tax rates-- that is, the percentages paid on higher amous of income. you can tell the difference between a liberal and conservative by the following test: a liberal believes that changes in taxes have very little effect on production but huge effects favorable on distribution. folks like myself believe it's exactly the opposite-- very high tax rates or even small changes in taxes have very adverse effects on production and they do very little to produce redistribution because the money gets dissipated and taken away through the political process in the ways that even the most ardent supporters of redistribution will not like. you think that steve jobs and bill gates wouldn't have done what they've done with higher marginal tax rates? >> well, yes, because they just don't do it. they have to be able to get investors to sign up for their things. those investors have to have disposable income. you start changing the
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particular policies so that there is higher marginal rates on taxable income, two things happen simultaneously: people have less money to invest; and people will be less willing to invest it because they will get a lower rate of return. in the period in which the american economy grew most vigorously. >> reporter: the united states had higher marginal rates, much higher, higher capital gains rates and more prosperity and greater economic equality. >> no. first of all, the highest marginal tax rates were also accompanied with tax shelters for everybody in those rates. the second thing is that the monies that were being spent in those days were being spent in much more intelligent ways, that is if you go and you look at either state or federal budgets and see the amount of money that was spent on what we would call standard infrastructure improvements and spent well like the interstate highway program in 1956, that was very high. the money that is spent today on infrastructure improvements of a good variety is a tiny fraction of what it was then, and the
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amount of money that is spent essentially on transfer payments has mushroomed enormously. the fundamental truth is the tax system is more redistributive than it was before which will lead to a reduction in efforts, and the regulatory burden on the economy is vastly greater and we would expect lower levels of growth. >> reporter: so if inequality is good because it provides incentives to people, is equality bad because it provides disincentives? >> no, it's not the equality or the inequality, it's the possibility of earning a higher rate of return which does it and what happens is if you let people go through voluntary transactions that produce mutual gain you will increase overall welfare, you will improve the position of those on the bottom. but increased overall welfare will produce greater skews in income because in a world with genuine opportunities you will create billionaires. in a world without it, the people at the bottom will remain where they were, there'll be nobody at the top to subsidize them, so everybody will turn out to be worse off. >> reporter: aren't many of the top 1% or 0.1% in this country
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rich because they're in finance? >> yes, many of the very richest people in the united states are rich because they are in finance and one of the things you have to ask is: why is anyone prepared to pay them huge sums of money if in fact they perform nothing of social value? and the answer is that when you try to knock out the financiers is what you do is you destroy the liquidity of capital markets and when you destroy the liquidity of those markets you make it impossible for businesses to invest, you make it impossible for people to buy home mortgages and so forth and all sorts of other breakdowns. so they should be rich. it doesn't bother me. >> reporter: are you worried that a small number of people controlling a disproportionate share of the wealth can control a democratic system? >> oh, my god, no! if you think the rich are controlling the situation, why is it that anything more than $1 million on a home mortgage turns out to be non-deductible while the amounts that are below that are less? if one thinks that the rich dominate the particular system, why is it obama is targeting for political advantage people with incomes over $250,000 rather
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than those who are under that particular figure? you're talking about 1% of the people and they're going to win an electoral battle against the multitudes? forget it! it's just not going to happen! >> reporter: you mean to tell me that you don't think the top 1% of americans don't have a disproportionate impact on the political process? no, of course they have a disproportionate impact, but that doesn't mean that they control it, they also ought to have it. the last thing you would want to do in any kind of sensible society is to have a set of rules in which one man, one vote dictates over every issue. and the last thing we need is a popular democracy in which one man, one vote in which you can have select taxes on people because once you can have selected taxes on certain people why not go along and say you know this is a wonderful mansion that mr. gates owns, what we ought to do is just take it and sell it off to some foreign sheik and take the money and divide it amongst ourselves. >> reporter: are you in favor of an inheritance tax? >> i'm in favor of its abolition. i've said that for years. i think the estate tax is the most mad tax imaginable.
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but if the point of inequality is to provide economic incentives to productivity, then why shouldn't everybody start from scratch? because that's a crazy. i mean, starting everybody from scratch turns out to be exactly the worst way to do this because it means that no parent is now going to be entitled to make investments in human capital in their children. that means you're going to try to socialize all the wealth and once you try to do that, what will happen is that the level of excellence that you will get at the top which is where you generate most of your future wealth, will be necessarily compromised. >> reporter: wait, but if you think transfer payments to poorer people disincentivizes them, why wouldn't transfer payments that you and i would make to our children disincentivize them? >> because, i can take care of my own money and deal with my own family in a prudential and rational way knowing this incentive, knowing who my children are. i give it to the united states government, they just give it out at random, the chances are that it will be watched and flourished is completely different. >> reporter: i assume you have some sympathy for people who are
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increasingly falling behind? >> everybody does, the question is you will not be able to help them through transfer payments, the only way you can help them is through increased opportunities. the rules that people put into place to protect workers strangled them. >> reporter: you don't think there's any change over the last bunch of decades in the united states in the ethos that we all share as to what's fair? >> no, i think there is a change. but it runs both ways. most americans like both things. they like to have opportunities for themselves and they like to have guaranteed incomes for themselves, and it turns out that one of the things that is so sad today about the american ethos is that people are much more talking about the me- generation or themselves instead of trying to think about this thing as a more systematic and global issue. and if you start to think about that-- i'm going to quote abraham lincoln because i like to do that, which is he said quite rightly that "you do not make the poor rich by making the rich poor." >> reporter: richard epstein, thank you very much. >> it's been a great pleasure to be here.
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>> ifill: now to capitol hill, there have been few clear signs of progress in the so-called super committee's efforts to cut more than a trillion dollars from the budget. and the clock is ticking. "newshour" congressional correspondent kwame holman has our report. >> reporter: with a thanksgiving deadline drawing ever closer, the deficit supercommittee held its first public session in a month. but republican congressman jeb hensarling of texas, a committee co-chair, made clear just how tough the job is. >> the challenge before us remains that we must find quality health care solutions, quality retirement security solutions for our nation at a cost that does not compromise our national security, does not compromise job growth in our economy and does not mortgage
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our children's future. everything else we do, including >> reporter: the day's most significant development may have come from behind closed doors. it was widely reported that committee democrats have proposed $2.5 trillion to $3 trillion in deficit reductions over ten years, through a mix of spending cuts and tax increases. they would also include between $200 billion and $300 billion in new stimulus spending. and at least $400 billion in medicare entitlement savings, half from benefit cuts, and the other half in cuts to healthcare providers. the issue of what to do about entitlements, like medicare, was fodder at today's hearing, for the head of the congressional budget office douglas elmendorf. >> entitlement programs, mandatory spending, is a growing share of federal outlays, in some cases growing rather rapidly; and without addressing that path of spending, it would be extremely difficult to put the budget on a sustainable path. >> reporter: but outside the hearing, democrats at a capitol rally underscored the political risk of any changes to medicare.
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>> keep your hands off our medicare! >> reporter: and congresswoman jan schakowsky of illinois said there are ways to save money without cutting benefits. >> people during their working lives put money into medicare all of that comes out of their social security benefits, the premium for medicare, plus they pay co-payments, the very idea that we would not touch a hair on the head of millionaires or billionaires and yet cut benefits for older americans is really a moral issue. >> reporter: in all, the committee is supposed to find at least $1.5 trillion dollars in deficit savings over ten years and make its recommendation by november 23 for an up-or-down vote in the house and senate. failure to propose a deal, or to win congressional approval, will trigger $1.2 trillion in automatic spending cuts. half of those cuts would come in defense spending. but defense secretary leon panetta, warned against any such
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mandate, at a senate hearing last month. >> if we pull that trigger, would we be shooting ourselves in the foot? >> you'd be shooting yourselves in the head. >> reporter: the super-committee was created as part of last summer's debt ceiling compromise to avoid a government default. but in the two months of its existence, committee members have chosen to keep their negotiations behind closed doors. that's led to uneasiness about where the committee will come out on spending cuts and revenues and even whether it can reach a deal at all. congressman cliff stearns is a republican from florida. >> i understand that they're trying to meet to come up with a solution, but i'm a little bit pessimistic, because it's taking so long. >> reporter: while analyst norman ornstein, at the american enterprise institute, is more optimistic. >> we've got two potential deals here. one is they do what their mandate is, that's about $1.2 trillion in budget cuts. another is they go for the stars, a $4 trillion overall grand bargain. >> reporter: whatever the
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figure, ornstein says the two parties have to make some progress now, even if the final bargaining goes down to the wire. >> this is an endgame. endgame negotiations go right to the end, that's november 23. but you can't wait to do all the details, if you're going to do some kind of significant debt reduction plan. you've got to get a lot of it in place, and then cut your deal, if you can reach one, right at the 11th hour. >> reporter: in the meantime, the committee will continue behind the scenes negotiations. its next public hearing is scheduled for november first. >> brown: again, the other major developments of the day: president obama outlined a relief plan to ease the pain of growing student-loan debts. european leaders met in and former goldman sachs board member rajat gupta pleaded not guilty to federal charges of insider trading. and to hari sreenivasan for what's on the "newshour" online. hari? >> sreenivasan: why do some people live to be 100 and beyond?
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one research contest is looking into what the human genome may say about centenarians. that's on our science page. new census data break down income inequality across the country, see how your state measures up in our interactive graphic. all that and more is on our web site: newshour.pbs.org. jeff? >> brown: and that's the "newshour" for tonight. on thursday, we'll look at the latest on the debt crisis in europe. i'm jeffrey brown. >> ifill: and i'm gwen ifill. we'll see you online and again here tomorrow evening. thank you and good night. major funding for the pbs newshour has been provided by: >> i mean, where would we be without small businesses? >> we need small businesses. >> they're the ones that help drive growth. >> like electricians, mechanics, carpenters. >> they strengthen our communities. >> every year, chevron spends billions with small businesses. that goes right to the heart of local communities, providing jobs, keeping people at work. they depend on us.
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>> the economy depends on them. >> and we depend on them. and by the alfred p. sloan foundation. supporting science, technology, and improved economic performance and financial literacy in the 21st century. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. captioning sponsored by macneil/lehrer productions captioned by media access group at wgbh access.wgbh.org
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